Tuesday, 11 March 2014

EconTalk this week

Richard Epstein, of New York University and Stanford University's Hoover Institution, talks with EconTalk host Russ Roberts about the differences between classical liberalism and hard-line libertarianism. What is the proper role of the state? Topics discussed include the Constitution, prudent regulation, contract enforcement, intellectual property, and the Supreme Court case, Lochner vs. New York.

This is an interesting interview, take as an example Epstein's view on the difference between libertarians and classical liberals.

Epstein: Well, first of all there is really a terminological gulf, and this is what I think is the fundamental ambiguity. There are many issues in which there are subsets--that classical liberals and the hard-line libertarians are in agreement. And therefore the differences between them simply disappear when you start to take on many progressive policies. The grounds on they may be opposed will differ from group to group, but the fact of the opposition is going to be very strong. So, for example, there is neither the classical liberal nor the libertarian believes that the government ought to support or prop up [?] any monopoly institutions where it is possible to have a competitive industry. And so, at that particular point, both are in favor of a smaller government. The classical liberal says: Monopoly has changed output for the worse so therefore when the government spends money to create a worse situation, it's a clear no-starter. The libertarian says: The government is using force to interfere with advantageous relationships; we don't care about the consequences; don't give me all this fancy economics stuff; we're just against it. So, one of them tends to be more consequentialist--that's the classical liberal--the other tends to be more deontological--that turns out to be the hard-line libertarian. [...] The term libertarian covers both of these things when you are dealing with these external debates. But when you start to get a little bit more philosophical, trying to figure out how small the small government ought to be, how the government ought to be put together, the difference between the deontological approach to the hard-line libertarian, and, it turns out, the relatively consequentialist approach of the classical liberal lead to some serious differences over a wide range of issues. I'll just mention--for example, the hard-line libertarian says: You guys want to get together to restrict output? It turns out that that's a contract like any other contract. You enforce contracts, you enforce that contract. The common law took the position these contracts are contracts in restraint of trade, and its preferred [?] was not to enforce those contracts, even though it did not impose criminal sanctions on the parties who entered into it. The modern antitrust guy says: You know what? We have the Sherman Act, and we are going to punish this civilly and criminally, because we think these cartels can endure longer that might otherwise be the case, even if the agreements turn out to be unenforceable in terms of the legal system. So what happens is, you have three kinds of approaches there. The libertarian, who just doesn't think of this as a problem and whose basic attitude is: we've got free entry, that will take care of itself. And the classical liberal says: I really like unenforceability because it will tend to increase the decay. And then some of the hard-line modern economists come along and say: The Sherman Act is a pretty good thing on this stuff. To which some classical liberals like myself will say: You really have to worry about the probable enforcement with the antitrust laws; increase in the size of government. Are you really sure you need this thing, and if so, are you going to do it correctly? And I think the answer is, if you get the right people running the system of the antitrust law, it's fine; if you get the wrong people running the system of the antitrust law, it's horrible. And then there is a very difficult political judgment as to whether you think good guys or bad guys are going to be running the system. So the [?] it seemed with the people like Bob Bork, is they really did focus this field on the cartel-like activities of various [?] departments, which reduced the error rate. The danger, of course, is that you will get some other administration that will believe that predation is the dominant offense, so when people start getting better products at lower prices, this now becomes ruinous competition, and then you are right back into the Progressive mode because the ruinous competition theme is one that is very dominant in their work. So there are profound differences in methodology. There are profound differences with respect to the actual consequences of the difference between these two systems.